BREWING CHANGE? New legislation expands Michigan Grape and Wine Industry Council to other beverage producers

While new bills seek to grow the membership of an agriculture industry council funded by licensing fees from Michigan alcoholic beverage makers, the changes still exclude one key sector and its supply chain from the group.

According to Paul Vander Heide, the president of the Michigan Cider Association and founder of Spring Lake-based Vander Mill LLC, it’s a classic example of taxation without representation being perpetuated against the hard cider industry.

Currently, state licensing fees paid by alcohol producers — including the makers of beer, spirits and cider — are earmarked to the state’s 30-year-old Michigan Grape and Wine Industry Council to fund grape research and promote the state’s wine industry. To date, only traditional winemakers and grape growers have been represented on the council, despite it being supported by the other industries.

That’s an issue lawmakers hope to address via competing bills in the state House and Senate.

But neither of the bills in their present form make provisions to include representatives from cideries on the council, despite their being classified as small winemakers.

“We’ve been specifically excluded from the council because it specified grape wines,” Vander Heide told MiBiz. “Just in the last year and a half, they’ve started knocking on the door because the top five cider producers in the state produce more than the grape industry statewide.”

While industry groups for brewers and distillers applaud the legislation for including additional sectors in the council and promoting the agricultural interests of all alcoholic beverage producers, others are not as convinced. Those groups argue adding more members to the council will dilute its already meager budget.

The research the group funded helped improve the grape-growing practices for Michigan’s climate and marketed the state’s wine-growing regions.

To date, Michigan-based craft breweries and distillers have pushed to reform the makeup of the council to represent their interests, and specifically to fund agricultural research to bolster their in-state supply chains.

“For me, the bigger issue has to do with agriculture and the development of more substantial agricultural products for beer production,” said Scott Graham, executive director of the Michigan Brewers Guild.

Graham said the state’s fledgling hop and barley industry are positioned similarly to where grape growers were 30 years ago when the industry council first formed.

Larry Bell, founder of Bell’s Brewery Inc., agreed that more research is needed to create a viable Michigan-based supply chain for the brewing industry.

“We’re not growing the best quality malting barley in the state,” Bell told MiBiz. “That doesn’t mean that we can’t, but that takes research. … That’s the kind of information you get over a decade.”

AN ISSUE OF FUNDING

While some existing members of the council don’t dispute that brewers, distillers and other stakeholders have a right to see some benefit from the money they pay in, they’re concerned that the legislation could drastically alter the operations of the council.

“This will have an impact if it goes through,” said Jeff Lemon, an appointed member of the council and owner of Berrien Springs-based Lemon Creek Winery Ltd. “It will change the makeup of the Wine Council and the whole function of the Wine Council.”

Lemon and other critics of the bills say they’re worried about sustainable funding for the Grape and Wine Industry Council if more is asked of the council and its revenue is not increased.

“We can slice the pie up, but the downside is that it’s just a pie,” he said. “There’s not going to be an infusion of more dollars, so I guess in the end, it’s just going to dilute the available dollars that the council has currently.”

The council operates on an annual budget of approximately $700,000, Lemon said.

However, Graham thinks that should the new legislation pass, it will give lawmakers cause to increase the council’s funding.

“If it’s good for breweries, why isn’t it good for the wineries as well,” Graham said. “It bears to be examined to see if there are ways to get more dollars into that pie.”

Critics also question why brewers and distillers would not want to form their own council, one dedicated to supporting research for hops and malted grain.

“If it’s a lack of money, I understand that, but I’d think they’d want their own,” Lemon said. “In a lot of ways, they’re probably more organized than many of the wineries and grape growers.”

Graham countered that the council’s structure and 30-year history would be a more efficient vehicle for funding the research to support the craft beer industry.

“It’s a more straightforward path,” Graham said. “I’m looking at how to grow the funding or better allocate the funding without taking away on the behalf of wine grapes and wine.”

While the Michigan Cider Association would rather dissolve the group entirely and find a more efficient use of the funds, they’re hopeful that if any expansions of the council are passed, they would include provisions for cider producers, Vander Heide said.

“If (the legislation) is going to move forward, it doesn’t make sense to specifically exclude cider when we’re becoming such a big part of the Michigan wine licensed industry,” Vander Heide said.

DIFFERING APPROACHES

While both bills exclude cideries from the council, they also differ in how broadly they would expand the group, with the House version also leaving off distilleries as it’s presently written.

Senate Bill 671, introduced on Dec. 15 by state Sen. Goeff Hansen, R-Hart, would expand the council to include distillers, a Michigan brewer, a hop or barley grower, and an operator of a retail food establishment that sells Michigan beer or spirits. The renamed Grape, Wine, Brewing and Distilling Industries Council would use a portion of its funds to support hop and barley research.

Meanwhile, House Bill 5025, introduced on Oct. 27 by Rep. Brandt Iden, R-Portage, would only add representation from the brewing industry and an agricultural sector that supports it.

The Michigan Brewers Guild worked closely with Rep. Iden on the House bill, and Graham worries the introduction of a competing bill could create gridlock and significantly delay the legislative process.

“Honestly, (House Bill 5025) started to get picked apart more deeply than we thought it would and now with the introduction of a potentially competing Senate bill, who the hell knows,” Graham said of how long it will take the legislation to be considered.

INDUSTRY COLLABORATION

As the craft brewing and distilling industries continue to gain traction in communities across Michigan, proponents of the legislation say that a unification of all alcohol producers would help boost local tourism.

“Whether it’s a winery, brewing or distillery, a lot of us are using Michigan agriculture and driving tourism to the state,” Bell said. “I think it’s a benefit for everyone if the state is not just helping to promote the wineries but the breweries as well.”

However, some members of the council point to the differences in how wine, craft beer and spirits are produced as one main reason to keep the producers separate from the current group.

“The number one ingredient in beer is water, so you can make beer continuously, where if you’re making wine, you have one shot at it a year,” Lemon said. “Maybe that’s why they refer to beer as a craft and wine as an art.”

But supporters of the legislation, including Bell, see comparisons of art and craft as detracting from the point of the changes.

“As far as these bills go, personally, I do not see this as brewers versus winemakers,” Bell said. “I see this as all of us coming together to help Michigan.”